2023 (4) TMI 606 - AT - Service Tax

CENVAT Credit - input services - whether after amendment to definition of input service under Rule 2(l) of CENVAT Credit Rules, 2004, with effect from 01.04.2011, the said CENVAT Credit was admissible to the appellant or not specifically after the words setting up has been deleted from the definition? - HELD THAT - In the present case activity was that of construction and therefore the services stated such as architect service, telephone expenses etc. were input services and therefore the Service Tax paid on the said services is eligible as CENVAT Credit to the appellant. Appeal allowed.

Summary

Issues:
1. Admissibility of CENVAT Credit for taxable services used in hotel construction post-amendment to definition of input service under Rule 2(l) of CENVAT Credit Rules, 2004.

Analysis:
The appellant, a provider of taxable services registered in Mumbai, constructed hotels in Delhi and Hyderabad and availed CENVAT Credit for Service Tax paid on various services used in the construction process. The dispute revolved around whether the CENVAT Credit was admissible post an amendment to the definition of input service under Rule 2(l) of CENVAT Credit Rules, 2004, specifically after the deletion of the term "setting up" from the definition. The lower authorities, along with the Learned Authorized Representative, contended that the construction of the hotels constituted "setting up" and thus denied part of the CENVAT Credit.

The appellant's Advocate relied on a previous decision by a coordinate Bench of the Tribunal in the case of Lemon Tree Hotel, where it was established that input services utilized for creating immovable property, essential for the appellant's business operations, were eligible for CENVAT Credit. The Tribunal in the Lemon Tree Hotel case emphasized that services like architect service, telephone expenses, etc., which contributed to the construction of the building, were indeed input services eligible for CENVAT Credit.

In alignment with the precedent set by the Lemon Tree Hotel case, the presiding Member of the Tribunal in the present case concluded that the construction activity undertaken by the appellant qualified as essential for business operations, making services like architect service, telephone expenses, etc., eligible for CENVAT Credit. Consequently, the impugned order was set aside, and the appeal was allowed in favor of the appellant.

This judgment clarifies the interpretation of the amended definition of input service under the CENVAT Credit Rules, emphasizing the eligibility of CENVAT Credit for services used in the construction of immovable property essential for business operations. The decision provides a significant precedent for similar cases involving the admissibility of CENVAT Credit for construction-related services post-amendment.